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You are considering a car loan with a stated APR of 6
You are considering a car loan with a stated APR of 6.09?% based on monthly compounding. What is the effective annual rate of this? loan?
Expert Solution
Effective annual rate of loan= ((1+ (APR/ No. of period))^ No. of period)- 1
here,
APR= 6.09%
No. of period (monthly)= 12
Put the values in the formula;
= ((1+ (6.09%/ 12))^ 12)-1
= 6.26%
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